The announcement today is just a small part of what's going on. We have been seeing a good and steady supply of issuance, and that's going to spook people a little bit from a supply perspective. |
The auction went quite well. There was good interest from indirect bidders, |
The economic data were mixed, but then we got some pre-weekend short-covering and maybe some minor month-end buying. |
The Fed's keeping rates on hold is a continual plus for the front end and the lack of inflation is what's keeping long rates low, |
The Fed's keeping rates on hold is a continual plus for the front end and the lack of inflation is what's keeping long rates low. |
The flattening move of the curve has been accelerating. There was some substantial buying of the new 30-year bond and now we're seeing a reversal of that as recent interest has waned. This has caused a quick reversal of the inversion. |
The June trade deficit was larger than expected which would suggest -- barring any other factors -- a small downward revision to second-quarter GDP growth, |
The June trade deficit was larger than expected which would suggest -- barring any other factors -- a small downward revision to second-quarter GDP growth. |
The market is in a range trade and that situation is only getting more pronounced as we near the end of the year. |
The sell-off has been sharp but not extreme. It did push the bond above 5 percent and that is going to be the psychological story taken away from all of this. |
The spread supply had been a factor weighing on the Treasury market and when the 10-year TIPS auction didn't go terribly well, that compounded the issue. |
The story of the week has been the inverted yield curve. It's tough to read too much into the inversion. We may be more firmly inverted tomorrow after the psychological factor sets in. We can have an inverted curve and have it not lead to a recession. It depends on how much the curve becomes inverted and how long it remains there until we can talk about a recession. |
There's a remarkable respect for the Federal Reserve and their ability to fight inflation, and because of that it's going to be difficult to see any major near-term rise in long-term rates, |
There's been a continued series of hawkish comments from the Fed, and there's supply pressure with today's five-year auction. All of this is going to put downward pressure on Treasury prices. |
We're looking at a Fed that's going to tighten in March. There's a clear suggestion we're going to see further declines in the two-year note going forward even if it's not in the next week or so. |